275% Dividend By Oil & Gas Company: November 12 Record Date; Buy Energy Stock?

Headquartered primarily in Delhi NCR, Indraprastha Gas Limited (IGL) is an Indian natural gas distribution company that provides natural gas for cooking and automobile fuel. One of India's top suppliers of clean energy solutions is IGL. IGL is prepared to serve as your go-to source for energy solutions for business, industry, and transportation. Indraprastha Gas Limited (IGL), which was founded in 1998, distributes city gas in Delhi, the National Capital Territory. Indraprastha Gas Limited (IGL) is a city gas distribution (CGD) business situated in India.

Indraprastha Gas Dividend

"We wish to inform that Board of Directors in its meeting held today, has declared interim dividend @ 275% i.e. Rs.5.50 per share (Face value of Rs.2/- each) on the equity shares of the Company for the Financial Year 2024-25. The record date for ascertainment of shareholders entitled to receive the aforesaid interim dividend shall be November 12, 2024 (Tuesday)," said IGL in a stock exchange filing.

Indraprastha Gas Financials

For the second quarter ending September 30, 2024, Indraprastha Gas Ltd. (IGL), the largest city gas operator in the country, reported a 19.41% year-on-year (YoY) drop in net profit at Rs 431 crore. According to a regulatory filing, Indraprastha Gas reported a net profit of Rs 534.8 crore for the corresponding quarter of the previous fiscal year. Revenue from operations rose 6.92% to Rs 3,697 crore in Q2FY25 from Rs 3,458 crore in the same period last year. Compared to Rs 656.4 crore in the same time of the previous fiscal year, EBITDA dropped 18.34% to Rs 536 crore in the second quarter of this fiscal year. In the quarter under review, the EBITDA margin was 14.5%, compared to 19% during the same period of the prior fiscal year.

Indraprastha Gas Share Price Target

"Factoring in lower margins and slower volume growth, we lower the DCF-based TP to Rs 455 (from Rs 600). For our DCF, we lower FY24-33E growth to 7% (from 7.5%) and average margin to Rs 6.5/scm (from Rs 8/scm). Our TP implies an FY26 target multiple of 19.0x, higher than the 5Y mean 1Y-fwd P/E of 18.1x. This is higher than the implied target multiple for MAHGL at 15.5x due to the use of higher terminal growth rate of 4% (2.5% for MAHGL) reflecting a larger footprint. As IGL has corrected by 25% over the past month, we now have 8% upside, and we reiterate HOLD," said BOB Capital Markets Ltd.

"Over the past five years, IGL has traded at an average one-year forward P/E of 17.9x with a one standard deviation range of 14.8x-21.0x on Bloomberg consensus. Similarly, it has traded at an average TTM P/E of 23.6x with a one standard deviation range of 17.3-29.9x based on actual earnings," as per the research analysts of BOB Capital Markets.

"We lower our DCF-based TP to Rs 455 (from Rs 600) with cut in our estimates. As our TP implies 8% upside, we downgrade our rating on IGL to HOLD from BUY. We remain positive on volume growth prospects for IGL subject to the company prioritising volume growth over margins. Though volume growth in Delhi is likely to slow due to an accelerated shift to electric vehicles, we believe that legacy GAs in UP and newer GAs will help IGL continue to deliver healthy growth over the next decade. In our view, CNG vehicles and EVs will co-exist in India over the medium term until battery technology and grid infrastructure mature. Further, IGL's recent foray into long-haul LNG vehicles as well as new category of two-wheelers open new growth avenues," the brokerage further added.

Disclaimer

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